ACC/410 Government and Not-for-Profit Accounting Week 6 Quiz – Strayer

ACC 410 Week 6 Quiz – Strayer

 

Chapter 6

 

Governmental Activities - Accounting for Capital Projects and Debt Service

 

TRUE/FALSE (CHAPTER 6)

 

1.    The resources to service all long-term debts of the governmental entity are typically accounted for in debt service funds.

 

2.    When governments establish capital projects funds, they may choose to maintain a separate fund for each major project, or they may choose to combine two or more projects in a single fund.

 

3.    GASB Statement No. 34 does not require a budgetary comparison statement for capital projects funds as it does for the general fund and for each major special revenue fund that has a legally adopted annual budget.

 

4.    Capital projects funds do not report long-term obligations in the fund.

 

5.    When bonds are issued at a premium, the capital projects fund can transfer those excess resources to the debt service fund.

 

6.    When bonds are issued at a discount, the debt service fund usually transfers an amount to the capital projects fund to make up for the deficiency.

 

7.    In accounting for costs incurred on a major construction project in a capital projects fund, the construction outlays would be accumulated in a long-term asset account.

 

8.    Debt service funds are maintained to account for resources accumulated to pay interest and principal on general long-term debt—that is, long-term debt associated primarily with governmental activities.

 

9.    In contrast to the accounting for debt service fund expenditures, the interest revenue on bonds held as investments should be accrued in the period the revenue is earned.

 

10.  Special assessments are imposed nonexchange transactions, similar to property tax levies.

 

11.  The interest paid on debt issued for public purposes by state and local governments is generally subject to federal taxation.

 

12.  Nongovernmental not-for-profits must account for defeasances differently than governments.


MULTIPLE CHOICE (CHAPTER 6)

 

1.   The capital project fund of a governmental entity is accounted for using which of the following bases of accounting?

       a)    Budgetary basis.

       b)    Cash basis.

       c)    Modified accrual basis.

       d)    Accrual basis.

 

2.   In which fund type would a governmental entity’s capital project fund be found?

      a)    Governmental fund type.

      b)    Proprietary fund type.

      c)    Fiduciary fund type.

      d)    Capital project fund type.

 

3.   The debt service  fund of a governmental entity is accounted for using which of the following bases of accounting?

       a)   Budgetary basis.

       b)   Cash basis.

       c)   Modified accrual basis.

       d)   Accrual basis.

 

4.   In which fund type would a governmental entity’s debt service  fund be found?

       a)   Governmental fund type.

       b)   Proprietary fund type.

       c)   Fiduciary fund type.

       d)   Capital project fund type.

 

5.   With regard to the resources dedicated to the acquisition of fixed assets which will be used in general government activities, which of the following is true?

       a)    Governments must maintain capital project funds for resources that are legally restricted to the acquisition of fixed assets.

       b)    Governments may maintain capital project funds for resources that are legally restricted to the acquisition of fixed assets.

       c)    Governments may account for any resources dedicated (whether legally or not) to the acquisition of fixed assets in any of the governmental funds.

       d)    Government must account for all resources set aside for fixed asset acquisition in a capital project fund.

 


6.   Salt City issued $5 billion of bonds at face value to fund the reconstruction of the major interstate highways in and around their city.  The bond underwriters withheld $2 million for underwriting fees and remitted the balance to the City.   Assuming the City maintains its books and records in a manner that facilitates the preparation of fund financial statement, how would the underwriting fee be accounted for in the capital project fund?

       a)   Reduce Other financing sources $2 million.

       b)   Reduce Bonds payable $2 million.

       c)   Increase Expenditures $2 million.

       d)   It would not be accounted for in the capital project fund.

 

7.    Sugar City issued $2 million of bonds to fund the construction of a new city office building.  The bonds have a stated rate of interest of 5% and were sold at 101.  Which of the following entries should be made in the Capital Project Fund to record this event?

       a)   Debit Cash $2.02 million; Credit Bonds Payable $2 million and Premium on Bonds Payable $.02 million.

       b)   Debit Cash $2.02 million; Credit Bonds Payable $2 million and Other Financing Sources $.02 million.

       c)   Debit Cash $2.02 million; Credit Other Financing Sources $2.02 million.

       d)   Debit Cash $2.02 million; Credit Other Financing Sources $2 million and Revenue $.02 million.

 

Use the following information to answer questions # 8 and #9

Voters in Lincoln School District approved the construction of a new high school and approved a $10 million bond issue with a stated rate of interest of 6% to fund the construction.   Bids were received and the low bid was $10 million.  When the bonds were issued, they sold for face value less bond underwriting fees of $.5 million.   The School Board voted to fund the balance of the construction by a transfer from the general fund. 

 

8.   The entry in the capital project fund to record the receipt of the bond proceeds would be

       a)   Debit Cash $9.5 million; Credit Bonds Payable $9.5.

       b)   Debit Cash $9.5 million; Credit Other Financing Sources $9.5.

       c)   Debit Cash $9.5 million and Expenditures $.5 million; Credit Bonds Payable $10 million.

       d)   Debit Cash $9.5 million and Expenditures $.5 million; Credit Other Financing Sources $10.

 

9.   The entry in the capital project fund to record the additional funding for the construction would be

       a)   Debit Due from General Fund $.5 million; Credit Other financing Sources $.5 million.

       b)   Debit Due from General Fund $.5 million; Credit Revenue $.5 million.

       c)   Debit Cash $.5 million; Credit Due to General Fund $.5 million.

       d)   Debit Other Financing Sources $.5 million; Credit Due to General Fund $.5 million.

 

 

Use the following information to answer questions #10 and #11

Voters in Phillips City approved the construction of a new $10 million city hall building and approved a $10 million bond issue with a stated rate of interest of 6% to fund the construction.   When the bonds were issued, they sold for 101.  What are appropriate entries related to the premium? 

 

10.   In the capital project fund

        a)   Debit Cash $100.000; Credit Revenues $100,000 ; no other entries required.

        b)   Debit Cash $100,000; Credit Other Financing Sources $100,000; No other entries required.

        c)   Debit Cash $100,000; Credit Revenues; ALSO

 Debit Other Financing Uses—Nonreciprocal Transfer $100,000; Credit Cash $100,000

         d)   Debit Cash $100,000; Credit Other Financing Sources—$100,000;  ALSO

 Debit Other Financing Uses—Nonreciprocal Transfer $100,000; Credit Cash $100,000

 

11.   In the debt service fund

         a)   Debit Cash $100.000; Credit Revenues $100,000 ; no other entries required.

         b)   Debit Cash $100,000; Credit Other Financing Sources—Nonreciprocal Transfer $100,000; No  other entries required.

         c)   Other Financing Sources—Nonreciprocal Transfer $100,000; credit Cash $100,000.

          d)   No entry in the Debt Service Fund

 

 

 Chapter 7

 

Governmental Activities - Capital Assets and Investments in Marketable Securities

 

TRUE/FALSE (CHAPTER 7)

 

1.    General capital assets are distinguished from the capital assets of proprietary funds and fiduciary funds.   

 

2.    General capital assets are excluded from governmental funds, themselves, because of the funds measurement focus (current financial resources).

 

3.    In governmental funds, the capital asset costs are reported as expenses when the assets are acquired.

 

4.    At the government-wide level, governments must depreciate inexhaustible assets, such as land, works of art, or historical treasures.

 

5.    Governments do not have to depreciate infrastructure assets if they can demonstrate they are preserving them in a specified condition.

 

6.    Unlike businesses, governments should not capitalize interest on general capital assets that they construct themselves.

 

7.    Most infrastructure assets are the responsibility of the federal government, not state and local governments.

 

8.    Prior to the issuance of GASB Statement No. 34, state and local governments provided virtually no information as to most of their infrastructure.

 

9.    Governments invest in marketable securities for much the same reason that businesses do—to earn a return on cash that would otherwise be unproductive.

 

10.  Governments are prohibited from entering into reverse repurchase agreements.

 

MULTIPLE CHOICE (CHAPTER 7)

 

1.   The objectives of financial reporting for fixed assets should be to provide information

       a)   About a governmental entity’s physical resources.

       b)   That can be used to assess the service potential of a governmental entity’s physical resources.

       c)   To help users assess a government’s long- and short-term capital needs.

       d)   All of the above.

 

2.   A governmental entity may record long-term assets in which of the following funds or account groups?

       a)   General Fund

       b)   Internal Service Fund.

       c)   Capital Project Fund

       d)   Debt Service Fund.

 

3.   General fixed assets are excluded from governmental funds because

       a)   The measurement focus of governmental funds is on current financial resources.

       b)   They are not used to generate revenues.

       c)   The basis of accounting is accrual.

       d)   None of the above.

 

4.   The City of Shiloh sold a used police car.  The police car, which  had a historical cost of $17,000 and a fair value of $12,000, was sold for $5,000.  Assuming that the City maintains its books and records in a manner to facilitate the preparation of the fund financial statements, what is the appropriate entry in the General Fund to record this sale?

       a)   Debit Cash $5,000; Credit Revenue $5,000.

       b)   Debit Cash $5,000 and Loss on Sale $7,000; Credit Automotive Equipment $12,000.

       c)   Debit Cash $5,000; Credit Other Financing Sources—Sale of Asset $5,000.

       d)   Debit Cash $5,000; Credit Automotive Equipment $5,000.

 

5.   Which of the following costs will be included in the cost of land on the government-wide financial statements?

       a)   Purchase price (invoice amount).

       b)   Cost of demolishing existing structures that cannot be used.

       c)   Closing costs.

       d)   All of the above.

 

6.   Donated assets are reported at

       a)   Historical cost to the donor.

       b)   Book value in the hands of the donor.

       c)   Fair value on date of donation.

       d)   Zero value because they were not purchased.

 

 

7.   To elect not to capitalize works of art and similar assets, a government must see that the assets meet all of the following criteria except:

       a)   The assets must be held for public exhibition, education, or research in furtherance of public service, rather than for financial gain.

       b)   The assets must be protected, kept unencumbered, cared for and preserved.

       c)   The assets must be subject to an organizational policy that requires the proceeds form sales of the collection items be used to acquire very similar items for the collection.

       d)   The assets must be subject to an organizational policy that requires the proceeds from sales of the collection items be used to acquire other items for the collection.

 

8.   If a government capitalizes works of art and similar assets, which of the following statements is true relative to depreciation on the works of art and similar assets?

       a)   Donated assets cannot be depreciated.

       b)   All works of art must be depreciation, not just exhaustible.

       c)   All exhaustible assets must be depreciated.

       d)   The government may elect to omit all depreciation.

 

9.   Which of the following is NOT an infrastructure asset?

       a)   Roads.

       b)   Sidewalks.

       c)   Buildings.

       d)   Bridges.

 

10.  If a government receives a donation of a work of art, the government must recognize revenue

       a)   Only if it elects to capitalize its collection.

       b)   Only if it elects NOT to capitalize its collection.

       c)   On all donations of works of art.

       d)   It cannot recognize revenue from donations.

 

 

 

 

  • Item #: 284

ACC 410 Week 6 Quiz – Strayer

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